Richbell Info. Servs., Inc. v Jupiter Partners L.P.
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Richbell Info. Servs., Inc. v Jupiter Partners L.P. 2002 NY Slip Op 30186(U) March 6, 2002 Supreme Court, New York County Docket Number: 605979/97 Judge: Karla Moskowitz Cases posted with a "30000" identifier, i.e., 2013 NY Slip Op 30001(U), are republished from various New York State and local government sources, including the New York State Unified Court System's eCourts Service. This opinion is uncorrected and not selected for official publication. [* 1] SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK: PART 3 ----------------------------------------x RICHBELL INFORMATION SERVICES, INC., Index No. 605979/97 THE RICHBELL GROUP LIMITED, and DAVID M.A. ELIAS, Plaintiffs, Decision - against- and Order JUPITER PARTNERS L.P., GANYMEDE L.P., EUROPA L. P. , JOHN A. SPRAGUE, TERRY J. BLUMER, RIT CAPITAL PARTNERS PLC, ATLANTIC AND GENERAL INVESTMENT TRUST . LIMITED, H-G HOLDINGS, INC., ERNEST SAUNDERS, and THE llARPVR GROUP LIMITED, ! ; Defendants. i ----------------------------------------x XARLA MOSKOWJ:TZ, J, : ..... Motion sequence numbers o·i1, 012, Ol3 and 014 are consolidated for disposition. All defendants move to dismiss the Verified Amended Complaint (the "Complaint•) pursuant Defendants H-G Holdings, ( "Hatj>ur•) , RlT Capital to CPLR 32ll(a) (2), (3), (5) Inc. and (7), ( "H-G") , ·The Harpur Group J..imited Partners PLC ( 'RIT' I and A.tlantic and General Investment Trust (.•AGtT•) alternatively move to dismiss for lack of jurisdiction pursuant to CPLR l2ll. (a) (8) ·(motion sequence nos. Oll and 012). Plaintiffs movl! to lift. the automatic stay of disclosure (motion sequence no. 013) and to vacate the orders of this court entered October 27, 2000 and March 6, 2001 that imposed sanctions upon plaintiffs and their counsel (motion sequence no. 014). [* 2] The court accepts the following facts in the Complaint and agreements, correspondence, documents attached to or incorporated by reference and other submitted materials as true for the purposes of the motion to dismiss, except wpere the documentary record flatly contradicts the all.egations in the complaint. I. Parties Plaintiff David M.A. Elias (•Elias•), a citizen of the United Kingdom, founded defendant Harpur. a limited liability company under the laws of England· and Wales, ·in the lll80' s and, by 1994, had built it into a company worth 167 million dollars. Harpur•s primary business was the operation and processing of corporate fuel cards that company fleets utilized. Elias Richbell Group Limited ("plaintiff RGL'l and plaintiff The (a holding company with limited liability under the laws of England and Wales) owned and controlled Harpur through the Northington Group Limited', ("Northington" l until Harpur became part of defendant H-G Holdings, Inc. Plaintiff RGL also indirectly owns and controls plaintiff Richbell Information Services, Inc. (•plainHff RIS"), a Delaware holding company. Defendant Jupiter Partners L.P. (•Jupiter•), a Delaware limited partnership, is an investment firm. 'Defendants ('~Europa") partner of Jupiter. Ganymede L.P. ( •Ganymede' l and Europa L.P . are Delaware limited partnerships; Europa is a gene;-al Ganymede, i which in turn, is a . general partner Northington is an Elias-controlled entity that subsequently became Richbell Strategic Holdings Limited ( •Richbell Strategic" l. 2 of [* 3] Defendants John A. Sprague ("Sprague") ("Blumer" I are general partners of and Terry J. Europa and Blumer principals of Jupiter. Defendant RIT is an investment trust company organized under the laws of England and Wales. RIT holds an indirect interest in Harpur. In the spring of 1994, Elias approached defendant RIT to find United States financial a partner Payments Systems, Inc. ("Gelco•). to help acquire Gelco Gelco is an American company in the business of expense and payment processing and management information services. Elias sough.t. to combine Gelco with Harpur. RIT recommended Jupiter as a potential investor. Defendant H-G Holdings, formed as the Inc. ( 'H-G•) is a Delaware Corporation holding company for the combined companies of Harpur and Gelco, Defendant ( "AGIT") is Atlantic a and General Investment company organized under the Trust Limited laws of England and Wales. AGIT is a wholly-owned subsidiary of RIT. Defendant Ernest Saunders (•Saunders") executive committee. is chairman of H-G • s From December 1993 until July 1996, Saunders was an officer of, a'l.<:I paid consultant for, plaintiff RGL·. II. Background In June 1994, Elias, representing RGL'. and Sprague and Blumer, repr,esenting culminated Jupiter, in the commenced formation negotiations of defendant that H-G, ultimately a Delaware corporation.that became the holding company for Harpur and Gelco. On June 16, 1994, Elias sent an outline of his idea for. the transaction to Jupiter, noting that time was "very tight" bec::ause the deadline to \bid for Geko was July B, 1994 and because of c::ompetition from American companies. 1t 3 (Compl. 3-9, 41.) On June [* 4] ;!6, 1994, Elias sent Sprague at Jupiter another letter, rioting that it would be a good idea for be and Sprague to talk on the phone about the valuation and proposed structure of the deal before July eighth. Elias noted that, although they would have .some flexibility over the terms after July eighth, because the Gelco offer would likely be conditional and the legal documentation would take some time, Jupiter and RGL would be under pressure to disclose their source of financing short:ly after submit.ting the bid. !Compl. , 45.) Elias met with Sprague and Blumer, Jupiter's principals, in Ne"1 York on July S and 6, 1994. During these nieetings, ·Elias provided Jupiter with a written summary of a proposal for the transact.ion. (Compl. ;, 47-SB. l Jupiter assented in principle to the basic t:erms of the summary and promised t:o send Elias a term shee~ memorializing the agreement. !Compl. 'I 59,) However, t:.he term sheet that> Jupiter sent on July eighth differed in three critical respects from Elias• proposal. In· the term sheet, Jupiter insisted on: (ll special veto rights for Jupiter; (2.) restrictions on t:he sale of ordinary stock; and (~i elimination of a commitment to a bank financing that Elias needed to keep his companies liquid. (Co111Pl· 'I 63.J . Because the bid deadline had arrived and he had no . other financing options, Elias accepted the new terms and submitted a bid for Gelco on behalf of one of his this valuable business opportunity. compa~ies so as not to lose (Compl. , 64.) From July 14 to 15, 1994, Jupiter, with Elias, conducted due diligence of Harpur in New York. !Compl. 1 68.) On July 20 and 21, Elias met with Jupiter to discuss the transaction further. At that time, Jupiter proposed a new share structure wpereby Jupiter would 4 [* 5] ~ ·i; ··- receive Class B shares that would be protected against under performance, and Elias• designee would.receive Class A shares that would be rewarded for over performance (the •A/B share structure•) . (Compl. , 70.) Elias realized that this arrangement could create a 'discontinuity of interest• between the A and·s shareholders and therefore worried that Jupiter might exploit its veto powers for its own benefit. Nevertheless, structure·to •save the deal.' Jupiter sent Elias a he agreed to the A/B share (Compl. 11 71, 731 s~cond term.sheet on July 22, 1994. The cover letter stated that Our willingness to complete the transactions contemp~ated by this letter ia al.ll>ject to the execution of definitive agreements between us and between Newco and Gelco, on terms satisfactory to us, and also to completion of accounting due diligence with respect to Harpur and Gelco by our accountants, Deloitte & Touche, which we expect to be completed by July 27. Except for the numbered paragraphs ·above [:relating to pre-merger notifications and similar matters], which are intended to be binding, this letter is not and is not intended to be a legally binding agreement. Neither of us shall be liable to the other except as provided in such definitive agreements. (Compl. Ex. 7.) On August 5, 1994, Jupiter sent a further revised term sheet to Elias on behalf of RGL with a cover letter containing disclaimers similar to the July 22nd term sheet. term sheet gave Jupiter additional The August 1994 protection against under performance. Elias considered this term sheet as so different from the original term sheet that it effectively constituted a different transaction. (Compl. , 80-83.) Although Elias believed that this term sheet created a "lack of commonality" between Jupiter and his own interests, Elias agreed to the terms, relying upon assurances 5 [* 6] ,. that Jupiter would not use its veto rights "in an untair or exploitive way to extort financial concessions.• (Compl. 1 83.I · When the parties met in early October 1994, Elias reiterated his concern about t.he lack of commonality of interest. between the parties. Specifically, he voiced his concern that ·Jupiter might become resentful of his higher rate of return if ·the new company over performed and might exercise its veto power to block a realization event such as an initial public offering l"IPO"l. (Compl. , 85.) Sprague allegedly assured him that Jupiter would never use its vei:o rights· in t:hat manner. ('Compl. 1 86-87.) In August 1994, Jupiter and RGL fo:rmed the holding company, HG, to effect the coml>ination of Harpur and Gelco. (Compl. , 84.) RGL and RIT contributed their indirect equity interests in Harpur and Jupiter contributed eighty-five million dollars to H-G. (Compl. 1 62, 63 .and Ex. 6.) On October 13, l.994·, Elias and RGL caused Northington to execute the "Stockholders Agreement of. H-G Holdings, Inc." lt:he "Stockholders Agreement"). The purpose of parties' rights the Stockho.lders in H-G. (Compl. {Co"iJl. , Agreement was Ex. 93 and Ex. l.O.) to define In l.O.) the addition to Northington, the signatories to the Stockholders· Agreement were Jupiter, H-G, 'and Richbell Holdings Limited ('Richbell Holdings•). (~.)! to In May 1995, plaintiff RIS and defendant RIT became parties the Stockhelders Agreement, with RlS receiving Richbell Strategic•s stock and H-G and RIT receiving Richbell Holdings• H-G shares. 11..Q.) Neither Elias nor plaintiff RGL, however, became parties to the Stockholders Agreement. The Stockholders Agre~ment incorporated the A/B share structure from the August 1994 term sheet. (Compl. , 104.) J~piter 6 [* 7] ' held approximately 36% of the equity in H-G; Northington held 33°%, and RIT held 2H. (Compl. , 106.) The Stockholders Agreement provides for the appointment of seven directors: three by plaintiff RIS, tw<> ·by Jupiter, one by RIT and one by a plurality of the shareholders. (Compl. , 97.) Additionally, section 3. 2 of the Stockholders Agreement requires Jupiter's consent before an Initial Public Offering ( • IPO') of H-G' s common stock could take place, when that offering would involve the issuance of primary common stock exceeding fiv~ percent of H-G's outs~anding common stock: Certain Restrictions on the. Company.· Neither the company nor any of its-Subsidiaries shall (nor shall the Stockholders, to the ext.ent they shall have the power to cause such acts) , without t.he writt.en app~val of the Majority Holder [~upiter] . . cumulatively issue additional Common Stock representing more than five percent of the total number of shares of Common Stock outstanding at the Closing Date, as adjusted for stock splits, stock combinations and stock dividends. Section 6.2 of the Stockholders Agreement gives Jupiter the · right to exercise voting· control over plaintiff RIS' shares and plaintiff RIS' Board seats if H-G' s EBITDA (earnings before interest, taxes, depreciation and amortization) growth rate falls below certain.contractually-set targets. Special .Maiority Holder That section provides: Control Prpvision. Following the completion of the Final Figures Report for every fiscal year of the Company beginning with the fiscal year ending December 31, 1996, if the Company has not achieved a cumulative An~ual EBITDA Growth Rate greater than the Applicable cumulative Annual EBITDA Growth Rate . • . for that year ·(the "Growth Test• l , the Majority Holder [Jupiter] shall have the right but · not the obligation thereafter to (i) ·exercise voting control over all shares of Common Stock beneficially owned by ·the parties hereto and (ii) appoint up to .such number of d.irectors on ·the Board of Directors as shall equal the total number of 7 [* 8] such directors. (Compl. Ex. 10). Finally, the Stock.holders Agreement contains both an integration clause and a clause requiring any amendments to be in writing and signed l:>y all parties to the agree111ent. Section 10. i provides: Entire Agreement. This Agreement contai~ t:he entire agree11tent and understanding l:>etween the parties hereto with re&pf!ct to matters covered hereby and supersedes all prior agreements and understandings, written or oral, among the parties with respect to the subject matter hereof. Section 10.3 provides: l\mendments. No amendment to this Agreement shall be effective unless it shall l:>e in writing and signed by all parties hereto. (la.) Contemporaneous with the execution of the Stockholders Agreement, million Richbell Strategic issued a note to Harpur for B.9 (the pounds intercompany debt formation. . Riehbell "Northington that was (compl. Strat~gic 11 Note•), outstanding at representing the time The Northington Note 90·92. I of an H·G' s calls for to repay Harpur in annual installments on the last business day of July (commencing in 1996) and to pay interest quarterly. (Compl. , 91 and Ex. 5. l for f..ediate repaymen~ of any defaults, of the outstand~ng principal in tm; event including a default •in making. payment of any principal moneys o~ The Stockholders ~greement Northington The Northington Note provides Note, interest due on this Note.• (Compl. ! Jupiter provides that, upon a default may exercise voting Ex. s.) i~ control the over plaintiff RIS• shares of H·G and appoint six of the seven directors ·to the Board. (Compl. Ex. 10) B [* 9] Toward the end of 1995, Elias sought to raise thirty million dollars to satisfy debts RGL owed to its investors a.nd creditors. To gain liquidity, Elias needed an IPO for H-G or other realization of plaintiff RIS' interest in H-G. ·Additionally, Elias could not borrow from a third party without placing a value on plaintiff R!S' interest in H-G. 1 ICompl. A/B share structure. 161.) This, in turn, meant undoing the consequently, over the next several months, Elias, Jupiter and RIT negotiated plaintiff ·RIS' and Jupiter's percentages of equity holdings in H-G in the event of an IPO. ·Plaintiffs allege that the parties reached an agreement in April ·1996 (the •April 1996 Agreelllent•J. (Compl. , 268.J According to the April 1·996 Agreement, the parties supposedly would undo the A/B share structure and carry out an IPO within six to nine months. exchange for the promise of an IPO, decrease ·its interest plaintiff RIS in H-G to approximately 28\ In agreed to and permit Jupiter to increase its interest to approximately 41%. (Compl. 1 261.) The parties allegedly memorialized the te:rins of the April 1996 Agreement in a written l:>ut unsigned inemorandUll\ . of understanding dated Apri~ 18, 1996 Ithe •Mou• J •. (Compl. , 260, 268 268; ,see. also Ex. C to Def. Mem. in· Support of Mot. To Dismiss attathed as Ex. A. to Affidavit of Howard Goldstein I •Goldstein Aff. ) , sworn to A.Pril 2, 2001. l .FUrtlier, . RIT separately agreed Ithe "RIT 1!196 Agreement•) to loan plaintiff RIS $30 million, to support the IPO and otherwise use RIT' s best efforts to ensure t.hat Jupiter complied with the terms of the April 1996 ·Agreement. (Compl. , 271. ) ' I On April 22 of RIT) loaned I 1!196, defe.ndant AGIT la wholly-owned subsidiary thirty million 9 dollars to plaintiff RlS and [* 10] plaintiff RIS issued a note for thirty million dollars to AGIT (the •AGIT Note•) .. (CompL 1 272.) The AGIT Note specifies a repayme!)t date of December 31, 1997 for the entire sum of the note. (l!i.) The ~te provides. that., if 'plaintiff llIS fails to pay either the principal or any interest by the repayment date, the interest rate· would rise from 2St per year to 28t until plaintiff RIS pays the amount due. A charge on plaintiff RIS • shares in H-G secures (lJ1.) the AGIT Note. (~.) The terms of the AGIT Note do not. refer to the MOU, the April 1996 Agreement or the 1996 RIT Agreement. An IPO of H-G.was not a prerequisite for repa,Y1Uent of or a condition of default under the Note. No IPO or other realization of the value of the shares of H·G occurred. On January 31, 1997, Jupiter and RIT entered into an agreement (the •January 1997 Agreeme~t•), in which Jupiter agreed, on an AGIT·Note default, to purchase a portion of tha AGIT Note in exchange for the rights to control any foreclosure on and sale of plaintiff RIS' shares, to vote· plaintiff RIS' shares and to designate the individual who would be RIT' s nominee as a director of H•G. (Compl. ,, 345-355, Exs. 52, 53.) On April 4 and 9, 1997, Jupiter notified plaintiffs Elias and , RGL unper section 5. l of the Stockholders Agreement that Jupiter would·kxercise voting control over plaintiff Rl:S' shares in H·G and exercise plaintiff RIS' right of appointment of directors to the H· G Soard because Northington Note. of Richbell Strategic's (Compl. , 423.) default under the On April 29, 1997, defendant Harpur presented a winding-up petition in the United Kingdom against Richbell Strategic for amounts due under the Northington Note. (CompL , ~28.) On July 24, 199'7, an English .CO\lrt ruled 10 [* 11] that, at least as of June 30, l.997, Richbell Strategic had •not paid a substantial debt which [had] fallen due• as a consequence of a default under the .Northington Note. (Goldstein Aff. Ex. F of Ex. A). On May 12, l9.97, AGIT declared a default on the AGIT Note. (Compl. , 430·431.l on May l.3, l.998, AGIT presented a winding-up petition in.~he United Kingdom against plaintiff RIS for amounts due.under the AGIT Note. (COmpl. 1 444.) III. 2rocodural Histori Plaintiffs colll!llenced this action .. in Novelllber l.997 and filed ·the Complaint in its present form on September 2, 19°98. The compl~nt contains· thirty-three causes of action sounding in. breach of contract, breach of the implied covenant of good faith and fair dealing, breach of fiduciary duty, corporate waste, fraud, negligent misrepresentation and otruir torts. The essence of the Complaint to is that defendants conspired misappropriate plaintiffs' valuable interest in H·G by exploiting plaintiffs• liquidity problems. Specifically, the Complaint asserts that defendants deliberately blocked an IPO of H·G to coerce plaintiffs . to agree to reduce their interest in the company a.nd to accept a . tbiryy million dollar loan and then continued blocking the IPO to forq. a foreclosure of plaineiffs' shares so defendant could purcllase them at an artificially low price . .. Defendants moved to dismiss the Complaint in December 1998, bot:h on the merits of the Complaint and on the ground of champe;rty pursuant to New York Judiciary Law § 489. 2 . •', By order entered August 2 Bc:cause plainti{fs were unable to flftan'ce this lawsuit themselves, on April l4, 199&, a committee of indivtduals who had invcSlcd in R.ichbetl Group companies so,~i&cd runds for the 1iLigetion from the shaieholdus l.l. [* 12] 6, 1999, t.he court (Cozier, J.S.C.J, dismissed the Complaint on t.he champert.y ground only, with leave t.o replead any claims that. did not. violate the champerty stat.ute.' ·Plaintiffs appealed and filed a 2poo, :Sy order entered April 10, second amended complaint.. Just.ice Cozier dismissed that. complaint with· le~vce to replead, finding it. substant.ially simil~r to t.he earlier-dismissed pleading insofar as it included many of t.he same fact.ual allegat.ions t.hat Plaint.iffs t.he court: had det.erlllined to be chaiapertous. appealed that order and filed a t.hird amended complaint. also Finding that the new pleading violated the court's prior order, by order entered October 27, 2000, Justice Cozier· directed a briefing on whether the court condition of should impose sanctions on reinstating the non-champertous plai~tiffs as portions of a the complaint. By order dated Marc;h 6, plaintiffs' filing of 2001, repeated Justice Cozier pleadings found containing champert01Js allegations merited sanctions under NYC!Ui that similar s· 130-l.. l (c) .. Just.ice Cozier impose~ a fine of $2,500 for plaintiffs• counsel t.o pay_ to the Lawyers• pla.intiffs to Fund for pay defendants' Client fees Protection· and d:i,rected and expenses incurred in ' conneltion with the motion to dismiss the t.hird amended complai.nt. Two w elts later, the Appellate Division, .First Department, reversed IM cndilots ofllichbcll lnform11ion Haldiftas, Inc and VCNllllll Orot1p Limited,_.,., IUchbcll Cltoup company (die "fundin; invCSIO<S"). The fllnding investorS even111ally poi<! for lhe lili&llian lhlllllch a compony called ·"Rkhbell 19n IJd.' ('1'.ithbcll 1991). On June 15, 1998, !Uthbell 1991 acquiml ploinlilfs' liliptian righls. By agreement, any money or other assets plainlifrs recover in this action would fim be used lO pay c:redilOrs. Plaintiffs would lhcn p1y Ille remainder in10 a ll'llSI Car lh• bcnefil or llichbell l991. The fvruling inveslon would th111 receive a perc:c:niap of the aust funds. Justice Coz.ier found lh11 •the sole ar pri~ary purpose of lhe c:rution orRichbt:ll t 991 and tbc 1ss11nmtnt of the d1im1 thereto WIS lo ptJJ'JUt lhis action"' in violation of Judi~iuy Law S•19. • 3 [* 13] Justice Cozier' s original August 1999 finding of champert.y and reinstat.ed the 1998 Complaint, aL v ~ Richbell Info. Services, Inc et Jupiter Partners L,P., 2001 N.Y. slip op •. 02605 (1•• i;>ep't. March 20, 2001) ·. Defendants then brought these motions, renewing t.heir prior. motions to dismiss the pleading on t.he merits; and plaintiffs moved t.o vacate the various sanctions orders and for . discovery. THI MQTXONS TO DISMISS Defendants• motions to dismiss t.he Complaint on the merits are ·granted. For the following rea•ons, plaintiffs'. claims are barred, ..i.nm illll• as it?oconsistent with the terms of. the express and compreheneive writt.en agreement.a plaintiff& execuceQ. to me.moria.lize their commercial In undertakings. view of this court•s determination, the motion t.o lift the automat.ic stay of disclosure is moot. For the same reason, the motions of defendants Rarpur, and AGIT to dismiss on alternative jurisdictional grounds are moot, aa are the motions.of RIT, H-G, Harpur and JIGIT to dismiss on the grounds of forum non conveniens and in the interests of comit.y, although the court does address these arguments 1. ~- Claims ReJ.ating to the Stockholders Agreement/Northingt.on Note Third: Fourth; Fifth, Thirtee~tli, Fourteenth, Twenty-Third the fifth cause of action, plaintiffs RIS, RGL and Elias allege that Jupiter fraudulently induced them into entering the st.ockholders Agreement: and the Nort.hington Not:e, Spec if ically, plaintiffs claim that Jupiter falsely represent:ed that it: would act· fairly and in good faith in exercising its veto right.s under the St:ockholders Agreement and Moreover, plaintiffs o~ly allege employ those rights defensively. that 13 Jupiter and RIT fraudulently [* 14] represented that the amounts due under the Northington Note could be paid out of an H-G realization event. A party generally cannot avoid the terms of a written agreement ·on the grounds of fraud simply l:>y asserting t.hat · •t.he writing did not express his own understanding of the oral agreement ·reached during negotiations,' (Chima.rt Msocs. v Paul, 66 NY2d 570, 571; Marine Midla.nd Bani<. N.A. v Embassy East. Inc , 160 AD2d 420, 422). rndeed, where there is a significant conflict between an express provision in a written contract and a prior alleged oral ·_representation, the representaticn CS\fjt:zerl andl conflict unreasonable Ltd o•Exoglitation v renders as Anat:ian, Indµstreille a reliance matter of 261 AD2d 307); Des Tabacs et upon law the oral {Cgutts Bank Soc;:iete Natignale Allumet:tcs v Salpmon B;qs. Intern. Ltd., 249 AD2d 232; Bango v Naughton, 184 AD2d 961). A party ca,nnot rely on oral representations where, through a merger or integration clause, it ·ba~ •in the plainest language announced and stipulateci that it is not relying on any representations• as to the matters it claims as fraud. Nr2d 31?, 3201 .aQ, . lDanann Realty Corp y Harris, s Citib11nk v Plapinger, 66 .NY2d 90). Anci, • [e)ven if an integration clause is general, a fraud claim will not . st.and/where the clause was trans~ction· that was i~cluded · executed in a multi-million dollar following negotiations between sophisticated business people and a fraud defense.is inco.nsistent with other specific recitals in the contract• (Emergent C@pital Mgmt. LLC v StoneJ.th Group, 165 F Supp2d 615, 622; ~. eohan v Sicular, 214 AD2d 637). Section 3. 2 of the Stockholders restrictions upon Jupiter's veto rights. 14 Agreement contains no. lt simply provides that [* 15] • {n] either the Company [H-G] nor any of its Subsicliaries shall" effect certain transactions, company• s stock., Holder incl~ding an IPO of more the 5% of the •without the written approval of the· Majority (Jupiter] . • ·Additionally, section 10. 7 of the Agreement provides that • (t] his Agreement contains the entire agreement and understanding between the parties hereto with respect to matters· covered . hereby and supersedes all prior agreements and i.nder8taridings, written or oral, among the parties with respect to the: subject matter hereof.• Accordingly, plaintiffs• claim of fraud regarding the.scope and proper exercise of defendants' veto rigl:&t• with 2'•apect to an IPO is inconsistent with the express · clause defining those rights and plaintiffs' own agreement that they were not relying upon any contrary, extrinsic representations. Moreover, plaintiffs representations were regarding .an not entitled to IPO because rely upon any such an event was a contingent future occu=ence outside the control of the parties (~, Horldcom. [Sup Ct. NY Col I Inc. v PrepayYSA Telecgm Cgrp @ff Id .i.Ul2 ngm Wgrldc;om I Ins; I i2/4/98 NYiiJ 30 1 "v SeoWay Mktg Ltd e ' 262 JID2d l.4) .. Identical I con•ide~ations bar plaintiffs' claim of fraudulent .. ~nducerent "1th 2'e&pect to the No2'thington Note. for phyment on a series of dates payment conditional upon receipt The Note .calls certain, ·.·rather than making of additional funds.. . Thus, plaintiffs.cannot.rely on tne alleged oral promises that :repayment ..ou~d be contingent upon a realization from their investment (~, Glenfcd Fin. Corp.~ A@ronautics end Astronautics Servs., 181 AD2d 575, ly den_~ed BO ,2d 893; M_n~r§. Hanover ':*31st AD2d 413, .lY dismissed 77 NY2d 989). 15 Co. y RestivQ, 169 [* 16] The third cause of action, for breach of contract, asserts a breach of the implied obligation of good faith and fair dealing. This theory fails because "[t] he covenant of good faith and fair dealing c.annot be used to add a new term to a .contract, espei:ially to a commercial contract. between two sophisticated commercial· parties · repr~sented. by counsel" (Q&L Holdinas. LLC v RCG GQldman Nor may the covenant. be ·eo .· r.r.c., __ AD2d _ ; 2001 WL 15581241. applied in a manner inconsistent with the express . ~e:rms of the (Sabetay y Sterling prug, · 69 NY2d 32~; Mark Patteragn. ,contr;.ct Jnc y Bowie, 237 AD2d 184; Marine Midland Bank. N.A. v Ypruk, 242 AD2d 932) , or be invoked to penalize a party for exercising its (~, rigbes under an agreement F2d i24 [2d Cir]; Hartford Fire Ins 723 F Supp 976). lnl:..,, relate Ml&-Cgm Sec to r,ight to ep, y Federated Dept Stgree. All of the alleged breaches of the coven!lnt either defendants' guaranteed Cgrp. y Galesi, 904 veto exercise an IPO of under their contractually section 3 .2 of the Stockholders Agreement or their control rights upon default under section S.l, The fourth cause of action asserts a breach of section 3.l of the Stockholders Agreement• alleging that Jupiter and RIT •faiUed] I • • to reyeore Elias to the H-G board when he waa duly Ris,•(and that Jupiter breached section S.l nomina~ed ~•falsely by claiming a default under the Northington Note as a pretext to seize voting control of plaintiff RIS' shares and bl'?ck Elia11 's reappoint11ent. t:o the Board.• conclusively However, establishes the record, that, no including later the than July complaint·,. 30, 1997, Richbell St.rategic was in default on the ,Northington Note. In April. 1997, Harpur petitioned an English court to wind up Richbell [* 17] Strategic on the ground of the default and, in July l997, the court r;uled that Richbell Strategic had failed to make the interest payment due on June 30, 1997. PUrsuant to &ection Stockholders Agreement, Jupiter then had the s. l of the right to vote plaintiff RIS' H-G shares and take plaintiff RIS' seats on the Board. Although the plaintiffs allege that Elias• removal from the ·Board was pr~mature in that it occ17=ed :i:n February 1997, and that he thus should have been.allowed to serve from that time·until July 30, 1997, plaintiffs have not pled any damages flowing from Elias• premature removal. Plaintiffs bave not identified any action the board would have resolved differently had Elias served. not even identified that period. (~, .ilir£ They have matter H-G shareholders voted upon during Accordingly, the fourth cause of action is dismissed Ryan Ready Mixed Concrete Corp. y Coons, 25 AD2d 530). The thirteenth and fourteenth causes of action allege tortious interference with the Stockholders Agreement and the Northington Note. A claim for tortious interference with an existing contract must plead (1) a valid contract between plaintiff and a third party (: · defendants• knowledge of the · contract, ·. (3) defendants• 0 wrongful, intentional procurement to breach or render performance • impossfble, 88 NY~d ~nd (4) damages (.11.CA, r.ama Hgldin':'o Cg. v.Smith Barney, 413; Krpnos. Inc. y AVX Com., Bl HY2d Dglson" Co., 1 NY2d 116). 9~; Israel v Wogd 'Because the · court has dislllissed the underlying ·contract claims, the claims for tortious interference. upon which they are predicated must fail as well. Likewise, the twenty-second and twenty-third causes of action, ... ,.. for unjust enrichment and con~ersion, are dismissed because they merely restate the facts underpinning the failed contract claims 17 [* 18] Interstate Adiusters. Inc, v First Fidelity Bank. N.A .. New (§1\ll_, ;rersey, 251 ~2d 232; (Yeterian v Heather Mills N.V. Inc., 183 AD2d 493; ,Julien J, Studl;y, Ino, v N.Y News, 70 NY2d 628; Clark- Fjtzpatrick. In;, y Long I§. R.R., ,0 NY2d 382). 2 .. ereagh of Fiduciary pµty <First and seqond causes pf Ai;tionJ In the first cause of action, plaintiffs allege t~at Jupit~r breached its fiduciary duties to plaintiffs RGL' and RIS when it . unreasonably refused to approve an IPO, used that refusal to ext.ract financial concessions and delayed any realization of value .until Jupiter wiped out plaintiffs' interel!lt. RIT allegedly joined in Jupiter• s conduct, by supporting the delay of the IPO (or other realization) to prevent plaintiffs from repaying the thirty million dollar AGIT Loan and by. agreeing to share in the proceeds fr0!1' a foreclosure of plaintiffs' H-G shares. Additionally, plaintiffs allege that Jupiter and RIT breached 'their fiduciary duties when they: exploited plaintiffs' (l.) need for liquidity by forcing plaintiffs to accept the 1995 capital distribution as a dividend rather ~han as a return of capital; (2) failed to · compensate plaintiffs for certain corporate transactions; .and (3) prevented plaintiffs from bo+rowing from others. Plaintiffs assert that I defe.o1ants' fiduciary duties arose out of: (l.) Jupiter, RIT and atatus as co-venturers in a joint venture; and (2) Jupiter, RGL' RIT and RIS' status as shareholders in a closely-held corporation. The second cause Of action alleges that all of the defendants aided and abetted the various breaches of fiduciary duty. Ordinarily, "[a] conventional business relationship does not create a fiduciary relationship factorsn (RKB Enters, lne in the absence of additional y Ernst & Young, 182 AD2d 971; Feigen y 18 [* 19] Advance Capital Mamt. Corp., l.50 AD2d 281, appeal dismissed 74 NY2d 874; Oursler·v Women's Interart ctr., 170 AD2d 407). After lengthy, contentious, arm's-length negotiations, the parties here fixed their respective rights and obligations in the Stockholders Agreement. None of the various theories plaintiffs proffer can convert that contractual relationship into a fiduciary one. plea~s The do .not establish the existence of a joint venture among the parties. In determining whether a j cint venture exists, the factors the court considers are the intent of the . parties, the degree of joint control and management of the undertaking, the sharing of profits and losses, and whether there ~as y a combination of property, skill or knowledge (JUUl, Mepdelspn Peinmap, 143 AD2.d 76, 77). "The ultimate inquiry is ·whether the parties have so joined their property, interests, skill.a and risks that for.the purpose of the particul.ar adventure their respective contribution• have become as one and the commingled property and · interests of the ·parties have thereby been made subj.ect to each of the associates on the trust and inducement that each woul.d act ' for . their joint ber. >fit• (Matter of St:einbec;k v G!!rosa, 4 N'!2d 302, 3l.7 (internal quotations and citations omitted), an'Dliil us 39, d~am;Laacd 358 ' ere allegations that: the parties have combined resources in a business entity are insufficient: (Mendelson, at 78). their ~ Likewise, claims. that they have agreed to act toget:her to achieve some stated economic object:ive are insufficient, as • [i;Juch agreement:, by itself, creates no more than a contractual obligation, otherwise eve:ry stockholders' agreement would give rise to a joint venture• (GCrosa, supra at 317-318). 19 Additionally, [* 20] • [a]n agreement to distribute the proceeds of an enterprise on a pe,rcentage basis, or the sharing of gross returns, does not in a.nd of itself establish a joint venture• (Gold Meghanieal Contractors y Llpyds Banlc PLC. 191 AD2d 3841 ~. PeVito v Pol<oik, l.SO AD2d 331). Although plaintiffs argue there was a joint venture by the time of the Gelco bid in July 1994, the pleadings de1110nstrate that only preliminary. non-binding negotiations had occurred up to that point. Likewise, nothing in the discussions thereafter that led up to the execution of the Stockholders suggests an intent to form a joint Agree~nt vent~re. in October l.994 To the contrary, plaintiffs allege highly adversarial negotiations culminating in a corporation the pa:rties structured specifically to protect: the stockholder& from each other. The terms of the Stockholders Agreement also do not establish a joint venture. At most, the terms establish an agreement to share the proceedll of the business on a percentage basis. tha.n providing that the parties would share losses, the provided Jupit,er with special· protection in th~ Rather Agree~nt event of under performance. . Further, plaintiffs concede that the · A/B share .' . s~c'j"1re resulted in the lack of a commonality of intereat.among the i;larties, rather than a fiduciary rel.atl.onahip . Moreover, . because the Stockholders Agreement does not reflect parties reserved any rights• for j· that the alleged joint venture . the to exercise independently, it is clear that the parties intended.to relegate their· rights to corporate shareholders and carry the business out exclusively through the corporate form. v AwJlair Corp, of Amer., 3 NY2d 20 444; Interset (§ll, Group, W.:i!!man Inc: v [* 21] Basenzwgig, 225 AD2d 402; Sagamore Cgrn. y Diamond Energy W. Corn,, 806 F2d 373) . Nor did a fiduciary duty arise out of the parties' status.as shareholders. Although a fiduciary relationship may arise in a closed corporation where the shareholders function as .W:. .f.im la=., .partners Fender v Prescott, 101 AD2d 418, 1079), the stockholders.are nevertheless ~und aff 'd 64 · NY2d to the terms of the agreement they have made. • (T] here is no reason why an appeal to general fiduciary law shoul~ be used . as a pretext for evading , . . contractual obligations• Inale v Gl;i.more Motor Sales, 73 NY2d 183, 190), "'!oting Coleman v Taµb, 638. F2d 628, 636). Moreover, fiduciary duties· do not arise where, as here, the shareholders lack a close working :i::elationship (Rosinv v Sphmidt, lBS AD2d 727, ~ denied, 80 NY2d 7.62) • Finally, even if there were some sort of f_iduciary relationship among plaintiffs and.Jupiter and RIT, plaintiffs have not pled conduct · that would constitute a breach. c~lain that defendants failed to exercise, exercising, . their contractual rights in a or refrained from manner acco111111odate plaintiffs' financial difficulties. / . cause/of action is dismissed. Rather, tbey that would Thus, the first Because plai~tiffs predicate the . s.econ/i cause of action for aiding . and al>etting upon th!' fail-ed claim for breach of fiduciary duties, this cause of action is also dismissed.· 3. Breach of· pi!cia;y nUty ITwenty-Fifth caupg pf Aqtionl the failure of defendants, in particular 21 Sprague, Blumer and [* 22] to "get the best sales price for H-G" amounts to a Saunders, breach of fiduciary duty. However, the obligation of corporate directors· to maximize the sales price generally arises only where the company is engaged in an active bidding process and the breakup of the company is inevitable Revlon Inc. v McAndrews w Forbes (~, oyc Holdings. Inc,, 506 A2d 173; Paramount CpJDtns. Inc. v lllk·, ·637 A2d · 34). Network. Because the pleadings demonstrate that H-G' s board neveJ;" co111111itted to an IPO or sale,· the duty plaintiffs urge does not apply (.Ill, Ivanhoe Partners v Newmont" Min, Corn., 535 A2d 1334) . Plaintiffs' allegations, that the company had taken •steps" toward a sale by retaining investment bankers, are insufficient, as these •steps• do not establish an active inevitable sale. bidding process or Thus, the cause of action is insufficient and dismissed. 4. Claims Relating to the 'April 1996 Agreement• (Sixth, Eleventh and Fifteenth Causes of Aptionl In the sixth cause of action, plaintiffs defendants breached the·. April J.996 Agreement. allege th.at Plaintiffs concede "that that Agreement was not a.written one, but rather·an oral one, in part, evidenced by the April J.B, 1996 MOU. Jupiter· allegedly promis;ed to suppott·, nther than veto, "an IPO or floatation within · six~ nine months, to loan plaintiff RIS $30 million an~ abide by the· -other terms of the MOU. The ·claim is dismissed. orally agreed to the constitute no more Even accepting that the defendants terms of than an 11 the MOU, agreement to Delisateeaen. Inc. v Schumacher, 52 NY2d 105. those agree" terms at best (~, Martin. A •mere agreement to agree, in which a material term is left for future negotiations, is 22 [* 23] unenforceable" (.liL_ at 109). The MOU, referring to issues agreed to only •in principle,• leaves a series of material terms unresolved, including the terms of tbe IPO, Elias• future role in management, his post.-IPO sharehol.dings and !:be continued existence of the Shareholders Jl.greement. And, even assuming that the parties• al.leged agreement to the MOU became binding without the need for future discussions, the terms themselves are too indefinite for enforcement. The MOU refers to a •common intention to achieve an IPO• with no. specific commitment to go forward or details of the transaction; an •active role• for Elias, without"specifying his duties; and •significant shareholding' for Elias, without any quantification of the degree. Additionally, the April 1996 Agreement is •devoid of any of the formalities of contract• (Allied Sheet Met:a.1 Works. Inc. Kerby Saunders. Inc. , 206 AD2d 166, 170; ~' y U.X. Cable Vegtures v Bell Atl. Inv., 232 AD2d 294, ~dismissed, 89 NY2d 9Bli. In contrast: t:o the lengthy Stockholders Agreement and the Northington Note, the MOU is a single page document lacking any recitals, words .of ai{Teeme.nt, signatures or other indicia .. of a contract4 •A contract of this magnitude is one that the courts would ordinarily ' . expectj the parties to embody in_ a formal writing• (Ji:A, Allied, supra/ 206 AD2d signat:ures, ·-a~ 170). Morio~ver, apart from the the complaint does not plead, l~~k of in a non-conclusory fashion; facts from which one.may reasonably infer oral assent to the MOU (~, Scbwartz y Sod. Of NY Hosp,, 199 AD2d"l29). The eleventh cause of action seeks enforcement of the April ...... 1996 Agreement under a theory.of promissory.,estoppel. However, a claim for promissory estoppel ·requires reliance upon •clear· and 23 [* 24] unambiguo~s promises" (Chatterjee Fund Managemant, pimensional Medi"a Assoc., 260 AD2d 159, 159). L P. . v As noted above, the ~erms of the alleged April 1996 Agreement are vague and indefinite. Therefore, they cannot form the basi!I for a promissory estoppel ·claim. The fifteenth cause of action, for tortious interferenc.e with the April 1996 Agreement, above, is also dismissed because, as noted a claim for tortious inference cannot survive absent a viable contract claim . . 5. 11reach. of :the R.IT 1996 Agreement (Eighth and Sixteenth Causes The eighth cause of action alleges that R.IT promised to use its best efforts to ensure that Jupiter obligations under the April l.996 Agreement. would uphold its The sixteenth cause.of action alleges truit Jupiter and other defendants interfered with ·that 11greement. !lecause; as noted above, there was no valid April l.996 Agreement, the claims are dismissed. 6. Intentional Interference with Business Relations Through Twenty-secona Causes pf The Action> twentieth. and twenty-first (Twentieth causes .of action allege tortious interference with unspecified. existing and prospective ' . busi~ess relatiop.ships inet!tutions, investors with unnamed, and creditors. third-party A. claim for financial tortious interference with prospective relationships requires, among other things, a showing of the use of wrongful means, such au physical violence, fraud or misrepresentation, prosecutions, or some degree defendant acted with malice, of ~- civil suits and criminal economic pressure, that for the sole purpose of harming the plaintiff (a.=, NBT Bancorp y Fleet/Noncar Fin 24 or Grpup, 81 NY2d [* 25] 614); Guard-Life Corp v S 183; swrlcr v parker HanJware Mnfr. Corp., Sony Music Entertainment Ins; I' 252 SO NY2d AD2d 294). Plaintiff must further allege that, but for the defendant's acts, a third party would have entered into or extended a contractual relationship with plaintiff (~. A1Der, Preferred Prescription. Inc, y Health Mgmt. Inc , 252 AD2d 414; M.J, Bender & & K Co, v Matthew co,; 220 AD2d 488, and plaintiff must identify a speci;l:ic prospective relationship with which defendant interfered paYPhoneg' tns;, . y Jijrnpiy State "'R•QC n ' 2i2 AD2d l.3 9; lb.lit. Bu@incaa Networks pf NY y complete Network soiucions, 265 AD2d 194) . In opposition to the motion, plaintiffs assert that, in 1997 . and 1998, defendants interfered with Elias• relationships with Lloyd• s Bank and Henry ·communications with them. to a Ausbacker by engaging in various However, plaintiffs still do not point specific contract er opportunity that defendants • conduct defeated. Further, communications were plaintiffs defamatory or do not allege that. the how they otherwise explain const.itut.ed wrongful means. ·Nor do plaintiffs assert that the sole motivation· behind plaintiffs. the communications .was a desirb to harm Accordingly, the twentieth and twenty-first causes of ' actioni are dismissed. · ~e twenty-second cause of action, allegiiig interference with plaintiffs'·. at tempts to obtain a loan from Jack Dellal, is ·also dismJ.ssed. Specifical1y, plaintiffs allege that defendants wrongfully refused to provide a written conanitment to an.IPO or.to unwind or replace the A/B share structure. However, a mere refusal to affirmatively assist another in obtaining financing does not constitute intentional interference with that financing. 25 Further, [* 26] .. ' plaintiffs• . entirely categorization of on the incorrect the. refusal. as proposition "Wrongful• rests that · defendant·s owed fiduciary duties to plaintiffs. 7. {Fraudulent Inducement of the AGI'.1' Note In the twelfth cause of action, (Twelfth Cause of plaintiffs assert that defendants fraudulently induced plaintiffs into signing the AGIT Note and pledging plaintiff RIS' shares as security for the.loan. Plaintiffs rely, again, upon the same representations about the inuuinence of the IPO and other matters that underlie plaintiffs• dismissed claim for breach of the April 1996 J19reement. claim that merely proceed (PSI Intern restates a breach of contract A fraud claim cannot Inc. y ottimp, 272 AD2d 2791. Further, as noted above, plaintiffs cannot assert that they reasonably relied on the representations because the representations meaningfully .conflict with the terms of the Stockbolde~s Agreement, as well as the AGIT Note, that provided for repayment on a date certain and without respect to the .occurrence of an IPO. a. Wrongful Enforcement of the AGIT Note seventeenth Cauoes of A£tion> 'fhe collu~ion, seventh cause of (Seventh, action asserts a claim bad faith and failure to proceed in a Ninth and for fraud, commercially reasonable manner with respect to the enforcement of the AGIT Note. Plainti.ffs contend! that the January 1997 Agreement was a rigging• arrangemeLt whereby RIT, •bid- AGIT and Jupiter colluded. to. cause plaintiff RIS to default on the AGIT Note in order to purchase plaintiff RIS' shares in H-G at a depressed price. The claim is dismissed. First, the allegation that defendants 26 [* 27] · caused the default relies, allegation of defendants' again, merely on plaintiffs• failed failure to approve an IPO and upon defendants' fraudulent inducement of the AGIT note. Second, the allegations of "bid rigging• and collusion rest upon a mischaracterization of the Ja,nuary 1997 Agreement. That agreement gives Jupiter the right to determine the amount at which RIT could· attempt to purchase plaintiff RIS' H-G . shares, but provides that the agre~ment is 'subject to applicBble bank;ruptcy, insolvency and other similar laws affecting the enforcement of creditors' rights ·generally, general ·equitable principles and the discretion of the courts in granting equitable remedies.• (Compl.· Ex. 53 S 7.2(b) .J Further, the agreement does not set the price for plaintiff RIS' shares. That price is still subject to the outcome of the foreclosure sale. Fina~ly, ~ecause.there is premature. has been no foreclosure sale, the claim AGIT has taken title to plaintiff RIS' shares pursuant to the Note and has presented a winding-up petition in the United Kingdom. Apparently, the propriety of the liquidation.is st'ill before·the High Court in that jurisdiction •. But no sale has occurred. Nor is one imminent. That the '.foreclosure ~ale may depresf the price.for the sto~k is too specul~tive to adjudicate. . 'tjie ninth cause of action, that plaintiffs should not have to repay the AGIT Note because ' AGIT and RIT breached the obligation of good faith and fair dealing, is foreclosed for the same reasons that the seventh cause of action for, inter alia, failure ·to proceed in a commercially reasonable manner with respect to the enforcement of thel AGIT N.;te,. was foreclos'"d. cause of action alleges that 27 Jupiter and The seventeenth other defendants ·: .. .., .;•. [* 28] ,. ~ . : .' intentionally interfered with, or procured the breach of, the AGIT No;e. once again, the claims are dismissed because they are based on conduct related to the l)lere failure to support an. IPO or provide financing, or acts performed in accordance with the parties• c~tractual rights. 9 •. Negligent MisrepresentStipn (Thirty-Third Caµae of Action) The thirty-third cause of action against RIT for negligent misrepresentation is dismissed. 19~6 the' ineffective April incorrect premise that RIT The misrepresentation relates to MOU Agreement· and relies upon the had fiduciary duties under the Stockholders Agreement, the alleged RIT 1996 Agreement and the purported H-G joint venture. 10. Breach of Fiduciary Duty (Twenty-Fourth and Thirtieth Causes The twenty-four:t:h and thirtieth causes. of action are derivative claims on behalf of H-G against Jupiter, RIT and others for corporate waste, self-dealing and misuse of corporate assets. Because H-G is a Delaware Corporation, Delaware law applies. Pursuant to the applicable Delaware Court of Chancery Rule 2J,l, a plaint~ff bringing part.ifularity the a eff~rts, derivative suit if any, made must bi t.~ •allege with plaintiff to obtain the action the plaintiff desires from the directors or comparable authority and the reasons for the plaintiff's failure to obtain the action or for not making the effort.• To establish the futility of demand, the plaintiff must rll.ise a reasonable doubt that: ·(ll the directors are disinterested and independent; or (2) the transaction was the product of a valid exercise of business judgment. 28 <~. [* 29] Brehm v Eisner, 746 A2d 244) • 1 In determining whether plaintiff has complied with the statute, •only well-pleaded allegations of fact must be accepted as true; conclusionary allegations of fact or law not supported by allegations of specific fact may not be taken as true• (Grabow v Perot, 539 A2d 180, lB7 [Del] , overrulec;l on otber grciunds, BrebJn y, Ejsner, 746 A.2d 244 [Dell). The complaint does'not allege plaintiffs' efforts as to the board or even the composition of the H-G board at the time the lawsuit was filed. Nor does the complaint make particularized ·allegations of the Board's disinterest or lack of independence of the majority of the directora. reapcnaible for the challenged actions. ll. Accordingly, these' clai111G are dismissed. Claims Relating to the Saunders• Consulting Agreements (Eighto;>enth, Nineteenth, Twenty-Eighth and Twenty-Ninth Causes The twenty-ninth cause Of action alleges·that defendant Ernest Saunders "had contracts to provide services to plaintiffs RGL and Elias" that he breached. The twenty-eighth cause of action alleges that Saunders breached his fiduciary duties to RGL and Elias and that all the other defendants aided and abetted h:\.rn. The eighteenth and nineteenth causes of action allege that various I ' defenfants .intentionally interfered and procured the breaches of Saunders• contracts with RGL and Elias . .The claims are dismissed. contract, the complaint must, First, in an action for breach of ~ AJ.1&, set forth the terms of ..... 1 A'lhou1h cin:umswu:cs where defendants' acts of W&Sle were so egnogiousso that they could nol be lhe produc1 of sound business judgmenli11ay ••cusc plaintiff from 1he demand requirement, Ibis exception only applies where •a majority of lhe directors making lhe decision have been replaced' I Ra let v B!11ban4 634 A2d 927, 934; W.il!2 Wj!son v Tully 243 AD2d 229). 29 [* 30] the agreement, (either by express reference or by attaching a copy of the contract) and the special damages plaintiff sustained (~. Chxysl er capital ·CQnr. ·v Hilltop Egg Farms. Inc, , 129 AD2d 921; gg;~rliJ;fJ;fliIJnu=Bl.lir;.o11....__,v,_Y.,11a;t._t o , GB AD2d 1009; Lupinski · y Village gf Ilion·, s .... 59 AD2d 1050) . Where there is no contractual obligation between -two parties or when the essential elements of ~be contract are not . specified, there can be no breach of contract claim (see, Fleissler JC B!!yroff, 266 AD2d 34; Sud v Sud, 211 AD2d 423}. applies to contracts for personal. aervices This rule (qaniqlia v c;ttfcaqci ·Tribune-New York News Svndicate, 204 AD2d 23:)). The complaint does not aet forth any particulars of Saunders• contract~ with RGL or Elias and" the contracts plaintiffs• have proffered in opposition to this motion, are not with RGL or Elias. The claims for breach of fiduciary duty and interference with contract are also dismissed because the claims are premised upon the alleged contractual relationship between Saunders and the plaintiffs. 12. Breach of Contract, Unjust Enrichment and Quantum Meruit fTbirty-First Caµse bf Ac;tionJ The 'thirty-first c.ause of action seeks recovery for management . services Elias and RGL allegedly performed for H-G and Harpur. The ' . . complarnt fails to set forth, 1ntn: i!J.li, the agreed· rate of ~omp~~sation a~ is thus too indefinite for enforcement in contract l~, Caniglia, .mun:Jl} . an express contract, The record also negates the existence of pleadi~g that Elias agreed to forgo compensation for his services in anticipation of realizing returns through an IPO. Moreover, in connection with the winding up proceedings Harpur commenced u!lder the Northington Note, non-party Richbell Strategic, not Elias or RGL, 30 --· asserted entitlement to [* 31] compensation for management service~ Richbell Strategic allegedly rendered between October 1994 and December 1996, .and plaintiffs have noe asserted any basis for their standing to pursue monies allegedly owed to that entity. 13. Accol.inting, Inspection of H-G's Books and Records and Declaratory Relief (Tenth, Tweney-Sixth and Twomey-Seventh causes of Actippl Plaintiffs have abandoi;ied, their claims .for an accounting under the Northington Note (tenth cause of action) and an insp.ection of H-G •s books and records (twenty-seventh cause of action). The twenty-sixth cause of action is also dismissed as moot, in.sofar as it merely seeks a declaration of the parties• rights, adjudicated above, under the various asreements. AGIT 1 S AND HARPU!l' S MOTIONS TO DISMISS FOR LACK OF PEIU30NAL Jl]RI spICTIQN Even·if the court were not to dismiss the amended complaint in its entirety, it would dismiss the amended col!lplaint as to AGIT and Harpur because defe!ldants. 2 it lacks per.sonal jurisdiction over these Plaintiffs base their claims against AGIT entirely on AGIT' s conduct in enforcing the 30 million dollar AGI'l' note'. This note was made in England and AGIT's allegedly' wrongful conduct in entorcing conse~ently, that ·note took place . exclusively in England. this court has no jurisdiction :over AGIT. 2 AGIT and Barpur, along wit.h H-G and R.I'T, a:rg'\le alteniativel.y that thia cue should be dind.aeed an ~ grounc:l9 of foru11 non .conveni.eiu and in t.he inter&st• of cOllity. However, under BUsiness Corporation. t.aw 1·~314(b) where a fOX"eign corporation auea another foreign corporation, a Nev York forum is presumptively convenient where, jnter alia, •the defen~t would be subject to juri•diction under CPLR 302. • Thus, if there were jw:iadicticn over AGIT and Harpur under CPLR 302, their forum non eonveniens ·argument wou.ld be u.navailing·. Likewise, becauae defendant.& ccmcede peraonal jUX'i•dicticn with respect to'· ff .. G and R.IT, they cannot· argue that this forwa is not convenient. tn addition, beca.use the caaes before the British court.a involve different iasuea from this case, there is no need ~o dismiss in the int.ere•ts of comity. 31 [* 32] ~ .. ' ~ , Nor does the January l.997 Agreement, containing New York choice of law and choice of forum provisions, confer jurisdiction over AGIT. Just because AGIT chose to submit to New York for the limited purpose of resolving disputes arising from the January l.997 Agreement.w~th R!T and Jupiter, does not require AGIT to submit to New York for the much broader dispute that plaintiffs assert in this case. Moreover, plaintiffs. are neither parties nor third- party beneficiaries to the .January l997 Agreement and therefore cannot enforce its provisions. Further, the acts jurisdiction over AGIT. RIT of in New York do not confer AGIT and RIT are separate companies. They .have separate bank accounts. With one exception, AGIT and RIT have separate directors. .(Budge Aff • , 8.) Other than noting tl)at AGIT and RIT are located at the same London _address, plaintiffs have failed ~o contradict AGIT's affidavit evidence demonstrating that it is an independent corporation from RIT. Finally, plaintiffs try to base jurisdiction over AGIT on va_rious visits t9 ·New York that Paul Griffiths, who at times represented AGIT in England, made on behalf of RD'.· However, the mere presence of a company's representative in a forum d;,,es not . <=onfe{ jurisdiction when that representative is not conducting the buaiyess cf that company. !Lawford y New x9rjs Life Ins, Co , 739 F •.. supp. 906. J For •imilar reasons there is no personal jurisdiction over ·defendant Harpur. \ Plaintiffs concluscrily assert that Harpur is ·the 'agent, instrumentality and alter ego cf Jupiter, RIT and other defendants ... (Plaintiffs' ~P· Mem. at pg. ll.6.) However, the a~ended complaint is devoid of any specific fact, such as identity 32 [* 33] of board members, to support plaintiffs' assertion that Harpur is one of these companies' alter ego. Nor have plaintiffs· connected Harpur to tortious conduct in New York. Thus, plaintiffs have failed to establish a prima tacie case conferring jurisdiction over Harpur in New York. Plaintiffs also assert that this court has •conspiracy jurisdiction• over Harpur and AGIT, because the acts of these two companies, · at pg. 117. ) of . ..· ~- :·'.-=~~f'.· even if outside New York, were in furtherance of a conspiracy with New York-based cause .... defen~ts. (Plainc.iffs• Opp. Mam. However, because this court has dismissed the seventh action for, inter alia, · fraud and conspiracy, this .. :, -~ :•: .. .. .. , ... :,: : · argument is moot. Accordingly, in the alternative, the court grants the motiori .·"'' .: ... of defendants Harpur and AGIT to dismiss the amended complaint against them on the grounds of lack of personal jurisdiction. THE MOTION TO VACl\TE PRIOR ORDERS CONCERNING Sl,Nc;TIONS Plaintiffs' motion to vacate the orders of October 27, 2000 .. ··,· and March 2001 imposing sanctions upon plaintiffs and their counsel is granted. These. prior orders were based, court's finding tha~ in part, upon the plaintiffs' third amended complaint contained I facturl allegations the court had previously found champertous. However, the Appellate Division's order of March 20, 2001 reversed the original order upon which the court had made the finding of champerty. Further, at oral argument prior to directip.g sanctions, Justice Cozier noted that he did not find pl.aintiffs' conduct tc be contumacious or corstitute willful was frivolous diso~edience, but rather that it onl~ in the "entire context of the litigation.• Viewing the record as a whole and, in particular, 33 the Appellate . ·~· . [* 34] Di vision• s reversal of the court's finding of champerty, this court finds that the orders imposing sanctions should be vacated. view of this determination, pl«intiffs' counsel is entitled to restitution of the $2, 500 paid to the Lawyers' Protection {~, CPLR so1.s [d] l In Fund for Client . Accordingly, it is ORDERED verified · . :· that the motion Amended . Complaint to dismiss is is granted, dismissed, with and costs the and disbursements to defendants as taxed.by the Clerk of the Court, and it ia further " ORDERED, that ·the motion to lift ·the autqrnatic stay of discovery is denied as moot, and it is further ORDERED, that the motion to vacate the prior orders concerning _,',• sanCtions is granted, and it is further ORDERED, ,; ~- . that the Lawyers• Fund for Client Protection is directed to reimburse plaintiffs' counsel the sum of $2,500. The foregoing is the Order.and Judgment of the court and the Clerk is directed to enter judgment accordingly. Dated: · .. ' FI l ED ( ENTER:.r. IHAR I I 200? NEWYCJAK COUNTY Ol.E11K'f l'EFISE 34
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